Paxos confirms it’s responsible for $500K mistaken Bitcoin transaction

September 13, 2023 Coin Telegraph

Bitcoin

The account that paid $500,000 to move $2,000 worth of Bitcoin was a Paxos server, the company stated.

The account that overpaid $500,000 in fees on Sept. 10 for a Bitcoin transfer belonged to Paxos, according to a Sept. 13 statement from the company. Paxos claimed that end users have not been affected and all user funds are safe. Paxos is most well-known as the issuer of stablecoins, including PayPal USD (PYUSD) and Pax Dollar (USDP), but also runs a crypto brokerage firm that carries Bitcoin (BTC).

The statement comes after users on X (formerly Twitter) were speculating that PayPal may have been responsible for the transaction due to a related wallet account that had been identified by analytics platform OXT as belonging to PayPal. A Paxos representative told Cointelegraph that PayPal was not responsible, as the error was its own, stating:

“Paxos overpaid the BTC network fee on Sept. 10, 2023. This only impacted Paxos corporate operations. Paxos clients and end users have not been affected and all customer funds are safe. This was due to a bug on a single transfer and it has been fixed. Paxos is in contact with the miner to recoup the funds.”

The mistaken transaction was first discovered on Sept. 10, shortly after it had occurred. According to blockchain data, the sender paid fees of approximately 20 BTC (over $515,000 worth at the time) to send just 0.07 BTC (worth less than $2,000 at the time). At the time, Casa wallet co-founder Jameson Lopp declared that the sending account “looks like an exchange or payment processor with buggy software,” as it had made over 60,000 transactions from the same address.

The block that contained the transaction was confirmed by Bitcoin mining pool F2Pool. On Sept. 10, the pool’s management offered to return the funds to whoever sent the transaction if a claim was made within three days. Otherwise, the exorbitant fee would be paid out to the pool’s hashing power contributors.

Before Paxos made its statement, Bitcoin enthusiast Mononaut declared on X that PayPal was responsible for the transaction.

BREAKING
The fat fingers belong to PayPal https://t.co/pKN0w5SfKB
— mononaut (@mononautical) September 13, 2023

According to Mononaut, the sending account, bc1qr35hws365juz5rtlsjtvmulu97957kqvr3zpw3, had exhibited behavior that “closely matches the behavior of a now inactive wallet [bc1qhs3gptkxem5y7yaq2yg0un2m8hae6wt87gkx4n].” This inactive address was labeled “Paypal” by blockchain analytics platform OXT.

To add further evidence for their hypothesis, Mononaut pointed out that this old wallet address transferred its funds to the new address through an intermediate account. Bitcoin blockchain data shows that the old address labeled “Paypal” by OXT transferred approximately 18.5 BTC to address bc1qlm0xlahpysq2v9yh5rhcc430xjz3xknqqnyvaf on June 19. That account then sent ‎around 5.37 BTC to the new address that later made the mistaken transaction. Lopp shared the thread, wondering aloud if PayPal would request the funds back.

Paxos later issued its statement confirming that the mistake had been its own, not PayPal’s.

Paxos isn’t the first crypto user or company to potentially pay thousands of dollars in fees because of a mistake. In 2019, one Ethereum user lost over $300,000 when they mistakenly pasted values into the wrong fields. Luckily for them, the mining pool agreed to return 50% of the funds lost. In 2020, another Ethereum user mistakenly paid $9,500 for a $120 trade. The user claimed that the mistake had “destroyed [their] life.”

In its statement, Paxos claimed that it had contacted the mining company that confirmed the transaction and is attempting to recover the lost funds.

3 reasons why Ethereum price is still pinned below $1,900

August 10, 2023 Coin Telegraph

3 reasons why Ethereum price is still pinned below ,900

Activity

PayPal’s stablecoin announcement and a handful of Ether ETF applications are bulls’ biggest hopes for a price trend reversal.

Ether (ETH) price has been locked within a tight trading range spanning from $1,800 to $1,900 since July 21. This remarkable lack of volatility has instilled a sense of uncertainty and skepticism among investors, despite recent positive developments which include the launch of PayPal's Ethereum-based stablecoin, and a surge in requests for Ether-based exchange-traded funds (ETFs).

PayPal's entrance into the world of cryptocurrencies could signify a major step toward mainstream adoption for Ethereum. However, this move also raises concerns about centralization and the potential loss of control over personal assets.

At the same time, the United States Securities and Exchange Commission (SEC) has recently witnessed a surge in applications for Ether exchange-traded funds (ETFs), which mirrors a trend of major asset management firms seeking to establish spot Bitcoin ETFs.

ETH’s drop in DApp deposits and active users is concerning

The Ethereum network is having problems because of high gas fees, which are the costs for transactions, including those done with smart contracts. For the past two months, the average transaction fee has been more than $4, which limited the demand for its decentralized apps (DApps).

*Ethereum network applications' total deposits in ETH. Source: DefiLlama*

There has been a noticeable decline in the total value of deposits locked (TVL) in the Ethereum network. This decrease marked the lowest TVL level observed over the past three years, as reported by DefiLlama.

While there may have been some shifts in this trend over the past week, the current scenario still reflects a substantial reduction in Ether deposits, specifically around 12.9 million, in contrast to the 14.75 million recorded three months ago.

To ascertain whether the decline in Ethereum's TVL correlates with a decline in its user base, investors should monitor the utilization of decentralized applications (DApps). It's important to note that certain DApps, such as gaming platforms and marketplaces, do not require substantial deposits.

*Ethereum's 30-day DApp activity. Source: DappRadar*

The number of active addresses using DApps is also down, which is concerning. In the last 30 days, the main DApps on Ethereum had 25% fewer active users. This might reflect that investors aren't satisfied about how much it costs to transact on the network.

Now, let's examine Ether derivatives to figure out whether the $1,800 level could actually prove a reliable support based on how ETH investors are positioned.

Derivatives metrics show balanced demand between bulls and bears

Ether quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement. As a result, ETH futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Ether 3-month futures annualized premium. Source: Laevitas*

As per the futures premium, also referred to as the basis indicator, professional traders in the Ether market have remained unable to adopt a bullish stance since July 16. The current level of 5% hovers on the brink of neutral-to-bearish threshold, indicating a state of equilibrium in demand between leveraged long and short positions.

The recent unveiling of Coinbase's Base network on Aug. 9 could contribute to Ether's challenge in surpassing the $1,900 mark. Several development teams within the ecosystem have announced their offerings for the Base network, which presently incorporates a version of the decentralized exchange Uniswap.

While Ether's bullish prospects are fueled by the potential approval of an ETF and the substantial user base facilitated by PayPal's stablecoin, the network finds itself confronted by the competition from existing smart contract platforms and challengers with ample resources. Such a scenario introduces an element of uncertainty surrounding the resilience of the $1,800 support level.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ethereum price won’t see $2K anytime soon, market data suggests

June 28, 2023 Coin Telegraph

Ethereum price won’t see K anytime soon, market data suggests

Analysis

Weak derivatives metrics, and declining TVL and DApps use, put Ethereum bears in a better position to keep ETH price below $2,000.

The price of Ether (ETH) faced strong resistance at $1,920 after a 17.5% rally between June 15 and June 22. Several factors contributed to the limited upside, including worsening macroeconomic conditions, the regulatory cryptocurrency environment and weaker demand for decentralized applications (DApps) on the Ethereum network.

ETH price faces macroeconomic headwinds

On June 26, a federal judge denied a motion from Binance that could have stopped the United States Securities and Exchange Commission (SEC) from issuing public statements related to the case.

In addition, in its mid-year outlook, HSBC Asset Management’s report warned of an economic downturn in the U.S. in the fourth quarter, followed by a “year of contraction and a European recession in 2024”. The report also noted that “corporate defaults have started to creep up.”

Finally, International Monetary Fund chief economist Gita Gopinath told CNBC on June 27 that central bankers should “continue tightening” by keeping interest rates high for longer than expected.

Ethereum network demand, gas fees drop

Usage of DApps on the Ethereum network failed to gain momentum as gas fees dropped 60%. Notably, the seven-day average transaction cost dropped to $3.7 on June 26, down from $9 four weeks prior.

DApp active addresses also declined by 27% in the same period.

*30-day Ethereum DApp activity. Source: DappRadar*

A large chunk of the decline was concentrated on Uniswap and MetaMask Swap, while most nonfungible token (NFT) marketplaces saw a surge in their unique active wallets (UAW).

Despite UNiswap NFT Aggregator's lackluster performance, the sector faced a decent influx of users on OpenSea, Blur, Manifold, LooksRare and Unick.

More concerningly, however, is that the total value locked (TVL), measuring the deposits locked in Ethereum's smart contracts, reached its lowest level since August 2020. The indicator declined by 6.9% between April 28 and June 28 to 13.9 million ETH, according to DefiLlama.

ETH price rally not supported by derivatives markets

So how are professional traders positioned for the next ETH price move? Let's take a lot at Ether futures to gauge the odds of ETH/USD breaking above the $1,920 resistance.

ETH quarterly futures are the preferred instruments of whales and arbitrage desks. However, these fixed-month contracts usually trade at a slight premium to spot markets as they demand an additional fee to postpone settlement.

As a result, in healthy markets, ETH futures contracts should trade at a 5 to 10% annualized premium, a situation known as contango.

*Ether 2-month futures annualized premium. Source: Laevitas*

According to the futures premium, known as the basis indicator, professional traders have been avoiding leveraged longs (bullish bets). Despite the modest improvement to 3%, the metric remains far from the neutral 5% threshold.

To exclude externalities that might have solely impacted the Ether futures, one should analyze the ETH options markets. The 25% delta skew indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put option premium is higher than the call options.

*Ether 30-day 25% skew. Source: Laevitas*

The skew indicator will move above 8% if traders fear an Ether price crash. On the other hand, generalized excitement reflects a negative 8% skew.

As displayed above, the delta skew has been flirting with moderate optimism since June 22 but has been unable to sustain it for long. Presently, the negative 2% metric displays a balanced demand for options.

Resistance below $2,000 remains formidable

Judging by the ETH derivatives metrics, declining TVL and Dapps use, bears are in a better position to defend the $1,920 resistance. Moreover, the worsening macroeconomic conditions and the cryptocurrency regulatory news flow confirm the moderate pessimism for risk-on assets, including Ether.

That does not necessarily mean that Ether is bound to retest $1,750, but it certainly presents an enormous hurdle for ETH bulls after failing to break the $1,920 level on three occasions between June 21 and June 25.

Consequently, at least for the short term, Ethereum bears have better odds of successfully defending this important price level.

FTX bankruptcy will be ‘very expensive’ but there’s a reason: Auditor

June 21, 2023 Coin Telegraph

auditor

The legal fees charged in the first months of FTX’s bankruptcy have been examined by an auditor, who has confirmed the case is “on track to be very expensive.”

Fees charged by the lawyers and the restructuring team working on the bankrupt crypto exchange FTX have topped $200 million in just over seven months, but an independent auditor argues it makes sense, given the mammoth task.

On June 20 the court-appointed fee examiner, Katherine Stadler, filed a 47-page report on the fees charged by the law firms in the roughly three months following FTX’s Nov. 11 bankruptcy and concluded they were not “wholly unreasonable in the moment.”

She remarked on the “largely unregulated financial system” in which FTX operates, adding the case was “remarkable” for the exchange’s “global scope, the complete absence of corporate records, and the non-existence of even the most basic corporate governance.”

FTX Professional Fees
This continues to be an extremely expensive case and the Estate has been petitioned for nearly $225mm over 5.5 months (with a couple small stragglers remaining).

March fees peaked at $1.6mm PER DAY!

Fortunately, April is trending positively downward. pic.twitter.com/eMTJC3R9Xr
— Mr. Purple ️ (@MrPurple_DJ) June 14, 2023

Stadler confirmed the team working on FTX had “requested more than $200 million in fees” since its November bankruptcy, adding:

“Notwithstanding the relative scope of the known asset pool, these proceedings appear on track to be very expensive by any measure.”

She gave a glowing review of the FTX restructuring team, saying she was “struck” by those who “sprung into action” to “begin transforming a smoldering heap of wreckage.”

“The fees incurred to date are remarkable, but so is the professionals’ performance.”

“Very few firms could have accomplished what these professionals accomplished in 90 days,” Stadler added.

Charging by the hour

Stadler’s report broke down the fees charged by the law firms in the first weeks after FTX filed for Chapter 11 bankruptcy.

It said hourly rates for the 242 lawyers on the case ranged from $388 to $2,165 and 46 lawyers were on more than $2,000 an hour.

New York-based law firm Sullivan & Cromwell has walked away with the biggest paycheck, having charged around $42 million in fees and expenses over that time.

Consultants Alvarez & Marshal were next in line, pocketing over $28 million in fees and expenses.

Previously, Cointelegraph analyzed the billings of the five firms involved in the proceedings and found they collectively invoiced over $100 million in the first quarter of 2023.

Stadler added some advice, saying “careful stewardship of administrative expenses will translate to a better outcome for creditors” along with a “cost-conscious and cost-effective” Chapter 11 process.

Hall of Flame: Peter McCormack’s Twitter regrets — ‘I can feel myself being a dick’

Ethereum gas fees cool down after May memecoin frenzy

June 5, 2023 Coin Telegraph

bitcoin ordinals

Besides Ethereum, Bitcoin’s meme frenzy via Ordinals has steeply declined from its high in May.

The average gas fee — transaction fee — on the Ethereum network has cooled substantially in the first week of June after reaching a multimonth high in May, owing to the memecoin frenzy and much maximal extractable value (MEV) bot activities.

The average gas fee has decreased to $7.34, an almost one-third drop from last month’s high of $20. In terms of gwei — a denomination of Ether (ETH) that represents one-billionth of one ETH — the daily median gas price has decreased to 24 gwei from a peak of almost 140 gwei last month, according to Dune Analytics.

*Average gas fees on Ethereum in the past six months. Source: Dune Analytics*

The memecoin frenzy started in late April and took center stage in May, leading to multiple new memecoins hitting the markets, such as Aped (APED), Bobo Coin (BOBO) and others. The dominance of memecoins in network activity was so high that it created an unusual shift in the top 10 gas-burning altcoins. Instead of ETH, Wrapped Ether (WETH), or Tether (USDT), memecoins such as Troll (TROLL), APED and BOBO became the top 10 spenders.

⛽️ A highly unusual shift in top 10 gas burning #altcoins has emerged today. Instead of $ETH, $WETH, and $USDT being at the top of the fee distribution list, we're seeing new assets like $TROLL, $APED, and $BOBO among them. Read our latest deep dive. https://t.co/7SlmJ59k2m pic.twitter.com/Y2kaLKZTrL
— Santiment (@santimentfeed) April 19, 2023

Another prominent reason for the rise in the Ethereum gas fees was the surging popularity of memecoins on decentralized platforms, with mainstream centralized exchanges taking longer to list them.

May was not just about the Ethereum memecoin frenzy; Bitcoin Ordinals also gained significant popularity. Ordinals enable decentralized storage of digital art on the Bitcoin blockchain. As a result, the Bitcoin network registered many new memecoins, with Pepecoin (PEPE) achieving a billion-dollar market capitalization.

Ordinals were introduced in January, and by the end of May, the number of Ordinal inscriptions on the Bitcoin blockchain had surpassed 10 million. Total fees paid for Ordinals inscriptions rose 700% in May to currently sit at 1,639 Bitcoin (BTC).

*Total Ordinals inscriptions on the Bitcoin network. Source: Dune Analytics*

With the memecoin frenzy dying down, Ethereum gas fees have cooled, and Ordinals inscriptions have also decreased significantly.

Magazine: Ordinals turned Bitcoin into a worse version of Ethereum: Can we fix it?

Uniswap DAO rejects plan to charge LP fees; UNI holders cite tax concerns

June 1, 2023 Coin Telegraph

Coin Telegraph

The proposal would have allowed Uniswap’s governing body to receive a percentage of the fees that currently go to liquidity providers.

A proposal to enable protocol fees for the Uniswap decentralized exchange failed on June 1, potentially allowing liquidity providers (LPs) to continue to earn all revenue from swaps, according to the proposal’s official webpage. It narrowly missed being passed, with 45.32% of votes going to the “no fee” camp and 42.34% voting to charge liquidity providers one-fifth of the fees they receive from users. Another 12.3% voted to enact a fee charge of one-tenth and 0.04% voted to charge one-sixth.

The “no fee” camp won by a plurality, implying that supporters of a protocol fee may have prevailed if they had united behind a specific fee percentage.

Uniswap fee switch vote neck and neck in the final hours.

Fun fact, I don't think any UNI vote that's passed on snapshot has been turned down once proposed onchain. pic.twitter.com/lasYGYaELM
— Matt (@MattFiebach) June 1, 2023

The vote was a “temperature check,” or non-binding preliminary ballot; further refinements may be offered in the future as discussion continues.

Uniswap is governed by the Uniswap Decentralized Autonomous Organization (Uniswap DAO), consisting of holders of the Uniswap (UNI) token.

The exchange currently charges crypto traders 0.01% to 1% of each swap as a fee, depending on the particular pool they use. However, all these fees go to the liquidity providers or market makers who provide crypto to be traded. The UNI token holders who theoretically own the protocol do not receive any of these fees.

In the proposal’s official forum page, supporters argued that Uniswap has matured as an exchange and no longer needs to offer full rebates to liquidity providers. The proposal’s author, GFX Labs, posted a list of fees from Uniswap and competitors Coinbase and Binance, arguing that Uniswap’s subsidies to LPs will still make it the best place for them to do business.

“Uniswap is in a strong position to turn on protocol fees and prove that the protocol can generate significant revenues,” GFX stated. “We need to reaffirm that liquidity providers are protocol users and do not need full rebates,” the user continued.

Opponents of the proposal argued that charging a fee would cause tax and regulatory headaches for UNI holders. For example, Porter Smith, deal partner for venture capital fund A16z, stated fees should not be enacted until one of two things happen: either Uniswap governance becomes an incorporated legal entity or a decentralized “flow of funds” is developed to send revenue directly to UNI holders:

“In the absence of a legal entity, it is important to reduce tax risk by using a programmatic flow of funds directly to token holders who are performing work on behalf of the DAO [Uniswap governing body]. […] A programmatic flow of funds could help ensure the taxable obligation rests with those users instead of the DAO.”

As is the case with most DAOs, Uniswap DAO has members in multiple jurisdictions worldwide and is not registered as a business in any country. The exchange began on the Ethereum network but has been trying to expand into additional networks recently. On April 14, the DAO voted to deploy Uniswap to the Polygon zero-knowledge Ethereum Virtual Machine (zkEVM) network. On May 17, it voted to launch a Moonbeam Polkadot parachain version as well.

Bitcoin (BTC) and Ethereum (ETH) Fees Plummet As Speculative Frenzy Cools, According to Crypto Analytics Firm

May 27, 2023 The Daily Hodl

Bitcoin’s Ordinal Inscriptions Surpass 7 Million Mark, Fueling the Trend’s Unstoppable Momentum

May 16, 2023 Bitcoin.com

Despite Transfers Lingering in the Mempool, Bitcoin’s Daily Transaction Rate Taps All-Time High

May 16, 2023 Bitcoin.com

$28,000 Bitcoin is in the cards, but it won’t happen without a struggle

May 15, 2023 Coin Telegraph

basis

Professional Bitcoin traders displayed strength after the BTC price corrected to $25,830, favoring further bullish momentum.

Bitcoin’s price declined for eight consecutive days through May 13, totaling a 9.4% correction. The last time such a losing streak happened was on June 14, 2022, after the Celsius lending platform halted withdrawals and FUD — fear, uncertainty and doubt — emerged from United States software firm MicroStrategy’s loan being liquidated at $21,000.

Nothing remotely similar happened as Bitcoin (BTC) retested the $25,800 support on May 12, apart from the network congestion and increased transaction fees. Traders and analysts speculated that a coordinated attack was aimed at causing network instability.

Bitcoin is under DoS attack. High transaction fees are the chosen pain point by the attacker, probably to makes bitcoin unusable for smaller players. pic.twitter.com/0J56liNSGf
— iris.to/jogi (@proofofjogi) May 7, 2023

As pointed out by investor and Bitcoin activist Jogi, high fees likely make the network unusable for smaller players, but they also impact the use of layer-2 scaling solutions such as the Lightning Network, as opening and closing payment channels require on-chain transactions.

The current FUD is quickly losing steam

Regardless of the rationale behind the surging demand for blockchain space, by May 12, the average transaction fee had already dropped 83% to $5.10 from a $31 peak on May 7, according to Blockchain.com data. It is also worth noting that the Ethereum network’s average transaction fee held above $18 between May 5 and May 11, according to Blockchair data.

Traders now question whether Bitcoin can bounce back above $28,000 given the uncertainty on the crypto regulatory front. Bitcoin futures and options data display moderate weakness, but a BTC price rally could happen as investors price in higher odds of a U.S. government debt default.

The current high-interest rate environment is beneficial for fixed-income trades, while the risks of an economic downturn negatively weigh on risky assets such as Bitcoin. Traders should be especially careful if Bitcoin futures contract premiums flip negative or if increased costs for hedging using options occur.

Bitcoin futures remain neutral despite the price correction

Bitcoin quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, BTC futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Bitcoin two-month futures annualized premium. Source: Laevitas*

Bitcoin traders have been extremely cautious in the past two weeks. On the other hand, the BTC futures premium stood at 1% or higher even after the 12.7% seven-day correction that culminated with the $25,830 low on May 12.

Bitcoin options risk metric stood neutral

Traders should also analyze options markets to understand whether the recent correction has caused investors to become more optimistic. The 25% delta skew is a telling sign of when arbitrage desks and market makers overcharge for upside or downside protection.

In short, if traders anticipate a Bitcoin price drop, the skew metric will rise above 7%, and phases of excitement tend to have a negative 7% skew.

*Bitcoin 30-day options 25% delta skew. Source: Laevitas*

As displayed above, according to the BTC options 25% delta skew, traders became increasingly bearish as the indicator spiked to 4% on May 11. Albeit in the neutral area, this is a stark contrast from the previous week, when the metric flirted with bullish sentiment at negative 8%.

Bitcoin options and futures markets suggest that pro traders are less confident, reducing the odds of a quick bounce above $28,000. Still, one could interpret the whole movement as bullish since the 12.7% correction was unable to flip BTC derivatives metrics from neutral to bearish.

Consequently, those betting on a bull trap, meaning a deeper Bitcoin price correction lies ahead, will likely come out disappointed.

Fees